The Federal Reserve’s Flow of Funds reported that amount of outstanding debt held by the household sector has declined since the middle of 2008. Mortgage debt fell for the seventh consecutive quarter to $10.26 trillion, as of the fourth quarter of 2009. Mortgage debt peaked at $10.55 trillion in the first quarter of 2008. Consumer credit has fallen for four consecutive quarters from $2.59 trillion at the end of the fourth quarter 2008 to $2.48 trillion at the end of 2009.
Additionally, banks are reporting weak demand for consumer loans, according to the Federal Reserve’s Senior Loan Officer Opinion Survey.
As a result of this decline in consumer and mortgage debt, the household debt (mortgage plus consumer loans) to disposable personal income ratio has fallen to 115.3 percent – its lowest level since the second quarter of 2005.
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